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CEO Confidential

Most Digital Transformations Fail, Here’s How to Change That

The vast majority of organizational change efforts fail. Estimates vary, but failure rates range from 60 to 80 percent and don’t seem to improve over time. And when it comes to digital transformations, recent research suggests that a paltry five percent meet or exceed expectations.

Why? Because those tasked with executing digital transformations don’t recognize the challenges associated with creating change in large, complex organizations. Too many transformation programs operate as silos—we have little bits of “digital” going on all over the company, but there is no synergy created across these efforts.

For decades, executives have made linear concepts, tools, and mental models their go-to’s when it comes time to change the business. Think about how budgets work, the Gantt charts of the project management world, or for that matter, any proposal you’ve ever seen from a management consultancy. All of these approaches fail to account for what we refer to as the “entangled” state of organizations.

In researching our new book “Orchestrating Transformation,” the Global Center for Digital Business Transformation (DBT Center) surveyed more than 1,000 executives and found nearly all relied on traditional change management methods.

It’s no wonder the success rate is so low.

Don’t Just Change, Orchestrate

Success in digital transformation means taking a more nuanced approach to organizational change. To truly respond to digital disruption at scale with organization-wide initiatives, one must abandon these linear change management frameworks and begin orchestrating change.

Orchestration is a topic that comes up only occasionally in management literature, although this is changing, at least in terms of vocabulary if not in actionable guidance. To date, the study of orchestration in a management context has focused primarily outside the four walls of the business—often at the “edge,” where value chains, strategic alliances, and platforms come into play. Usually it means leveraging an ecosystem, platform, or network to work with third-parties. This could be suppliers or people with good ideas your company wants to tap.

But orchestration is not purely an external concept. What if we considered how ecosystems, platforms, and networks could be brought to bear on a company’s internal change effort? Our research tells us that companies must extend orchestration beyond familiar domains like supply chain or open innovation and apply it to digital business transformation.

If you imagine an organization as an orchestra, you can see how orchestration works. Think of a company as being composed of instruments, grouped in sections. Together, they perform a piece of music. The different instruments all contribute to a harmonious and successful performance.

Conducting Your Transformation Orchestra

So how do you “play” the music? Even the most beautiful score will sound like a cacophony if the instruments all play at once or if the musicians are not “all on the same page.”

To help leaders conceptualize this challenge, the DBT Center created the “Transformation Orchestra” framework, an analogy in which eight instruments of a musical orchestra correspond to eight organizational elements in a company.

Each element contains important considerations for leaders, such as the company’s go-to-market model, how it engages stakeholders, and how it’s organized. The Transformation Orchestra is a construct that helps leaders think in a “post-functional” way, moving past organizational silos to activate all the resources that must come together to achieve the company’s aims.

As with a musical piece, a successful digital business transformation engages the eight instruments when and where they’re needed. While a violin solo can be powerful, a single instrument produces far less impact than a full orchestra. Organizations that change only their offerings (for example, by adding connectivity to a product) tend to achieve limited impact. According to our research, the best transformations—those with the highest odds for success—are holistic. They encompass the entire organization and all its resources.

Instruments Add Focus and Clarity

The instruments we’ve identified as the core of the Transformation Orchestra are the product of hundreds of interactions with executives since the inception of the DBT Center. Through these engagements, we’ve determined that the success or failure of a transformation hinges on balancing the requirements of these eight instruments, spanning three sections of the Transformation Orchestra.

Go-to-Market Section

  • Offerings: The products and services your company sells.
  • Channels: How products and services reach customers; route to market.

Engagement Section

  • Customer Engagement: How your company engages with its customers.
  • Partner Engagement: How your company engages with its partner ecosystem.
  • Workforce Engagement: How your company engages with its employees and contract staff.

Organization Section

  • Org Structure: The structure of business units, teams, reporting lines, and profit and loss centers (P&Ls).
  • Incentives: How workers are compensated and rewarded for their performance and behavior.
  • Culture: The values, attitudes, beliefs, and habits of the company.

An instrument is not a function like procurement or finance or marketing. For example, Workforce Engagement, one of the eight instruments in the orchestra, is not purely an HR issue, although many of the resources involved may “come from” that function. Similarly, Customer Engagement doesn’t just involve the sales organization. Because most of us have been steeped in hierarchical and linear bureaucratic structures (think of a classical org chart), our minds are conditioned to form and fence in groups that align to these structures.

Instruments are collections of organizational resources aligned to business outcomes, which must be harnessed to execute change. They comprise three types of resources that do not reside in a particular silo, but span the entire organization: people, data, and infrastructure.

  • People are the individuals and teams needed to execute change. To effect a change in the company’s offerings, for example, you might draw on people from R&D, product marketing, manufacturing, finance, a services organization (to support the offering), distribution and more.
  • Data is the information needed to make a change. This information could include customer data, partner data, pricing data, product performance data, competitive offer data, real-time data about relevant systems (e.g., transaction engines, web servers), data on supply chain events, and much, much more.
  • Infrastructure is all the “stuff” needed to make the change. Infrastructure represents tangible things—things you can stub your toe on—that can be used to execute change. They include facilities (e.g., offices, warehouses, contact centers), capital equipment (e.g., plant-floor equipment, vehicle fleets, machines), and especially IT assets (e.g., computers, mobile devices, data center hardware).

Change is the only Constant

Through the DBT Center’s research, it has become clear that too many companies see transformation as a kind of momentary revolution, or more commonly, as an episode they must endure, emerging on the other side of the process in an altered state.

This is fundamentally misguided. Transformation is not an event; it is an essential and perpetual task of leadership. By establishing your Transformation Orchestra, you can set your organization up to effectively respond to disruptive competitors.

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James Macaulay
James Macaulay is the co-author of Orchestrating Transformation: How to Deliver Winning Performance with a Connected Approach to Change. He is Senior Director, Customer Transformation at Cisco, and a visiting scholar at the Global Center for Digital Business Transformation, an IMD and Cisco initiative. James Macaulay is an opinion columnist for the CEOWORLD magazine.